Goldman Sachs Announces DeFi ETF, but Investors Will Be Disappointed

Goldman Sachs, a leading global investment firm, has filed for a DeFi exchange-traded fund (ETF). The fund, which Sachs refers to as an “Innovate DeFi and Blockchain Equity ETF,” would attempt to provide investment results closely similar to the Decentralized Finance and Blockchain Index of Solactive, a German financial indices provider.

While the news may look promising, a deep dive into Solactive’s index spoils the mood. The index currently includes no crypto-native company. Furthermore, the index has an extremely strict set of rules for determining its components, which greatly restricts the possibility of adding DeFi protocols in the future.

Details of Goldman Sachs’ DeFi ETF

Investment banking giant Goldman Sachs has filed with the SEC for an exchange-traded fund (ETF). The fund would provide institutions with exposure to decentralized finance projects and other traditional stocks.

As per the filing, the fund would invest at least 80% of its assets into securities, stocks, and depository receipts included in its index. The bank stresses that the fund would provide investors with exposure to companies that align with the themes of blockchain technology and the digitization of finance.

The eligible markets that Goldman would be picking from for investments include Australia, Canada, France, Germany, Hong Kong, Japan, South Korea, Switzerland, the Netherlands, the United Kingdom, and the United States.

Sachs’ “DeFi” Fund Does Not Contain Crypto-Native Companies

In the filing, Goldman says the fund will be designed to correspond to the Decentralized Finance and Blockchain Index from Solactive. The filing stated:

“The Goldman Sachs Innovate DeFi and Blockchain Equity ETF (the ‘Fund’) seeks to provide investment results that closely correspond, before fees and expenses, to the performance of the Solactive Decentralized Finance and Blockchain Index.”

However, a look into Solactive’s decentralized finance index reveals that the index contains no crypto-native companies. As of July 26, Solactive’s decentralized finance index includes a total of 20 stocks. Nokia, Facebook, Google, Accenture, and Fujitsu account for the largest share of the index — each constitutes between 6 to 7.15 percent of the index.

Moreover, a look into the methodology of Solactive’s Index further disappoints fans of crypto-native DeFi index products as it has an extremely strict set of rules for determining its components. Among some requirements, the index requires a company:

• To be listed on a regulated stock exchange
• Surpass a market cap of $500 million
• Have a daily average volume of at least $1 million for the past six months

Considering these strict requirements, it is very unlikely for DeFi projects, which are mostly experimental, to meet the terms. 

Crypto ETFs Surge in Popularity

Grayscale recently unveiled its DeFi fund which, in contrast to Goldman Sachs’ new fund, actually includes prominent DeFi protocols. Grayscale allows clients to invest in cutting-edge DeFi protocols such as Uniswap, Aave, Synthetix, and others. 

Moreover, the SEC is currently reviewing over a dozen Bitcoin ETF applications and has delayed decisions on several of them. Despite these delays from the SEC, fund management firms continue to submit applications.

Last week, Global X submitted its application for a bitcoin ETF days after it launched a blockchain ETF. Valkyrie has taken a similar approach as it filed an application for a Bitcoin exchange-traded fund (ETF). Further, VanEck and WisdomTree have filed for Ethereum ETFs.

The desire for crypto ETFs, in particular Bitcoin ETFs, has been around for some time now. Traders have been eagerly awaiting for ETFs to get approved, and while there have been plenty of applications, they have all been lingering in the hands of the SEC. 

However, considering that Sen. Elizabeth Warren gave the SEC a deadline of July 28 to provide a regulatory framework for the crypto ecosystem, we could very well have some answers in the near future. 

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When do you think Bitcoin ETFs will hit the markets? What are your thoughts about Goldman Sachs “misleading” DeFi fund? Let us know in the comments below.